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December 04, 2023 at 04:43 PM
What You Need to Know
- Clients can sell some term life policies.
- Older but healthy insureds can often sell their policies.
- A policy sale price can be much higher than a policy cash surrender value.
We are often asked what makes the best life settlement case. What should you be looking for?
The answer is simple: Look for policies on seniors that are going to be lapsed or surrendered.
At that point, exploring the life settlement option should be mandatory.
The two types of policies that get the most interest from buyers are term policies that are reaching the end of the conversion period and guaranteed universal life or guaranteed second to die universal life, even if the insureds are healthy.
Here are three recent cases that illustrate how these types of situations are so attractive to buyers and so meaningful to sellers.
1. $500,000 Convertible Term Policy
Issued select preferred, on a male, age 75
His current life expectancy averaged eight years.
As the result of a life settlement, the policy owner was paid $150,000, and the agent made $40,000 in total compensation (some from the term conversion and some from the life settlement).
What makes this such a good example is that the conscientious agent was aware of the final conversion date and informed his client, six months ahead of time, that a decision about the future of the policy had to be made.
As soon as his client decided the coverage was no longer wanted, he knew that a settlement could be a better alternative to just letting the policy lapse for no value.
2. $1 Million Guaranteed Second to Die Universal Life Policy
Both insureds issued preferred, non-tobacco; both (male, age 85; female, age 86) in excellent health
Thinking that they were too healthy for a life settlement, they were going to surrender the policy for $29,839.
The broker, however, remembered that there could be settlement value even on healthy insureds when the premium was guaranteed.
The policy owner wound up with $210,000 (seven times the cash surrender value), and the broker made $43,500 in commission.
3. $1 Million Guaranteed Universal Life Policy
Issued standard non-tobacco, on a male, age 88, in good health
The cash surrender value was zero, and the policy was about to lapse.
The agent didn’t think that there could be value because the client was healthy, but he figured it couldn’t hurt to try.
Robin S. Weinberger, CLU, ChFC, CLTC, is the director of national accounts for Life Insurance Settlements Inc. She has been a general agent and director of national accounts for Connecticut Mutual and vice president of marketing for Sun Life of Canada. She can be reached at 